Disruptive Innovation: Moving at the Speed of People
On the surface, efficiency innovations sound good, and they can be, but more often than not efficiency innovations are about less and fewer. When you create a new technology that does more and costs less the cost reduction comes from fewer hours by fewer people. And if the cash created by the efficiency finances more efficiency, there are fewer jobs. When you create an innovative process that enables a move from machining to forming, hard tooling and molding machines reduce cost by reducing labor hours. And if the profits fund more efficiency, there are fewer jobs. When you create an innovative new material that does things better and costs less, the reduced costs come from fewer labor hours to process the material. And if more efficiency is funded, there are less people with jobs. (The cost reduction could also come from lower cost natural resources, but their costs are low partly because digging them up is done with fewer labor hours, or more efficiently.)
But more-with-less and the resulting efficiency improvements are helpful when their profits are used to fund disruptive innovation. With disruptive innovation the keywords are still less and fewer, but instead of less cost, the product’s output is less; and instead of fewer labor hours, the product does fewer things and satisfies fewer people.
It takes courage to run innovation projects that create products that do less, but that’s what has to happen. When disruptive technologies are young they don’t perform as well as established technologies, but they come with hidden benefits that ultimately spawn new markets, and that’s what makes them special. But in order to see these translucent benefits you must have confidence in yourself, openness, and a deep personal desire to make a difference. But that’s not enough because disruptive innovations threaten the very thing that made you successful – the products you sell today and the people that made it happen. And that gets to the fundamental difference between efficiency innovations and disruptive innovations.
Efficiency innovations are about doing the familiar in a better way – same basic stuff, similar product functionality, and sold the same way to the same people. Disruptive innovations are about doing less than before, doing it with a less favorable cost signature, and doing it for different (and far fewer) people. Where efficiency innovation is familiar, disruptive innovation is contradictory. And this difference sets the the pace of the two innovations. Where efficiency innovation is governed by the speed of the technology, disruptive innovation is governed by the speed of people.
With efficiency innovations, when the technology is ready it jumps into the product and the product jumps into the market. With disruptive innovations, when the technology is ready it goes nowhere because people don’t think it’s ready – it doesn’t do enough. With efficiency innovations, the new technology serves existing customers so it launches; with disruptive, technology readiness is insufficient because people see no existing market and no existing customers so they make it languish in the corner. With efficiency, it launches when ready because margins are better than before; with disruptive, it’s blocked because people don’t see how the new technology will ultimately mature to overtake and replace the tired mainstream products (or maybe because they do.)
Done poorly efficiency innovation is a race to the bottom; done well it funds disruptive innovation and the race to the top. When coordinated the two play together nicely, but they are altogether different. One is about doing the familiar in a more efficient way, and the other is about disrupting and displacing the very thing (and people) that made you successful.
Most importantly, efficiency innovation moves at the speed of technology while disruptive innovation moves at the speed of people.
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